FirstEnergy says it has deal on Harrison County plant

CHARLESTON, W.Va. --FirstEnergy has reached a tentative deal it hopes will allow it to move forward with transferring a Harrison County coal-fired power plant to one of its West Virginia subsidiaries.

Akron, Ohio-based FirstEnergy said the agreement, which needs West Virginia Public Service Commission approval, includes a commitment to "bring more jobs" to West Virginia, provides financial contributions for economic development and means increased energy efficiency efforts.

The PSC's staff and Consumer Advocate Division have signed off on the deal, and the Sierra Club has given the settlement its tentative blessing, according to a filing received by the commission Wednesday morning.

However, the West Virginia Citizen Action Group opposes the settlement and says the proposal does little to make FirstEnergy's efficiency efforts competitive or to diversify the utility's generation portfolio.

FirstEnergy is seeking PSC approval to sell its Harrison Power Station near Shinnston to subsidiary Monongahela Power. The company says the move is the best option to deal with deficits in electricity needed to serve Mon Power customers in West Virginia.

Critics say FirstEnergy proposed excessive rate increases to fund an overvalued transaction, ignoring the potential gains from better demand-side energy efficiency programs and locking the Mon Power subsidiary into a generation mix that is too narrowly focused on coal.

FirstEnergy said the agreement includes a commitment to "bring more jobs" to West Virginia, and provides financial contributions for economic development, weatherization programs, low-income utility payment assistance and an education program to promote energy efficiency initiatives in the state's public schools.

"We appreciate the support of the parties in reaching this agreement, and look forward to implementing our cost-effective plan to provide our customers with electricity generated in the heart of our service territory," Holly Kauffman, president of FirstEnergy's West Virginia operations, said in a prepared statement. "Having 100 percent ownership of the Harrison Power Station will help shield our customers from unpredictable spot market prices and help provide greater rate stability for years to come."

Under the proposed deal, Mon Power would be able to recover from customers about $858 million of the $1.1 billion it will pay a sister company for the Harrison plant. However, Cathy Kunkel of the Citizen Action Group said that is still far more than the company's book value for the facility of about $554 million.

"Even with the reduced price," she said, "it's still a significant markup."

Mon Power had proposed a rate hike of $63 million a year to cover the costs of the plant but agreed in the settlement to instead reduce rates by about $16 million a year, said Byron Harris, chief of the PSC's Consumer Advocate Division.

That will result in a monthly rate reduction for residential customers of about $1.42, according to the proposed settlement.

James Van Nostrand, a West Virginia University energy law professor, noted that acquiring the Harrison plant gives FirstEnergy far more additional generation capacity than it is projected to need in the coming years.

The settlement, Van Nostrand said, "is too much power and the price is too high."